Construction projects can sometimes lead to disputes over payment, resulting in the filing of liens against properties. The Michigan Release of Lien Bond provides a mechanism for property owners to remove these liens while disputes are resolved. This article offers a comprehensive overview of this important bond.
What is a Michigan Release of Lien Bond?
A Michigan Release of Lien Bond, also known as a discharge of lien bond, is a surety bond that allows a property owner or contractor to remove a construction lien from a property without waiting for the resolution of the underlying dispute. By posting this bond, the property owner substitutes the bond for the property as security for the lien claim. The bond guarantees that if the lien claimant prevails in their claim, they will be paid up to the bond amount. Essentially, it's a way to keep the property title clear while the legal process unfolds. To understand the function of this type of bond, it is helpful to understand the differences between surety bonds vs. insurance.
Why is a Michigan Release of Lien Bond Needed? (Governing Law)
The requirement for a Michigan Release of Lien Bond is established by the Michigan Construction Lien Act (Act 497 of 1980), codified in the Michigan Compiled Laws (MCL) under sections such as MCL 570.1101 et seq. This act provides the legal framework for construction liens and outlines the procedures for discharging them. By allowing property owners to substitute a bond for the property, the act facilitates the resolution of disputes without tying up property titles indefinitely. This provision benefits both property owners and lien claimants, ensuring that claims are addressed while allowing property transactions to proceed.
Who Needs to Get this Bond?
A Michigan Release of Lien Bond is typically required when:
- A property owner wants to remove a construction lien from their property.
- A contractor wants to clear a lien filed against a project they are working on.
- Any party involved in a construction dispute wants to expedite the process of clearing a property title.
In short, anyone who needs to quickly remove a lien from a property, while a dispute is ongoing, will need this bond.
How do I Get a Michigan Release of Lien Bond?
Obtaining a Michigan Release of Lien Bond involves several steps. First, you'll need to contact a surety bond provider. SuretyNow, for example, specializes in providing these types of bonds. The process typically involves completing an application and providing financial information. The surety company will then assess your application, considering factors such as your credit history, financial stability, and the amount of the lien. Once approved, you'll pay a premium for the bond, and it will be issued. Understanding how surety bond underwriting works is essential for a smooth process. It is also important to review 10 things to know before buying a surety bond.
What Information do I Need to Provide?
When applying for a Michigan Release of Lien Bond, you'll typically need to provide:
- Property Information: Legal description of the property subject to the lien.
- Lien Details: Information about the lien, including the amount and the claimant.
- Dispute Details: A summary of the dispute that led to the lien.
- Financial Statements: Documentation of your financial stability.
- Credit History: The surety company will assess your creditworthiness.
- Legal Documents: Any relevant legal documents related to the lien and the dispute.
Providing accurate and complete information is crucial for a smooth application process.
How Much is a Michigan Release of Lien Bond?
The cost of a Michigan Release of Lien Bond varies depending on several factors, including the amount of the lien, the applicant's financial stability, and the surety company's underwriting criteria. The bond amount is typically equal to or greater than the amount of the lien. The premium you pay is a percentage of that amount. Applicants with strong financial records and good credit will generally pay lower premiums. For a deeper understanding of the factors affecting cost, review surety bond cost.
What are the Penalties for Operating Without This Bond?
Failing to properly discharge a lien can result in:
- Continued Lien on Property: The lien remains on the property, preventing clear title transfer.
- Legal Action: Potential legal action from the lien claimant.
- Financial Losses: Potential financial losses due to delays in property transactions or project completion.
- Damage to Credit: A lien can negatively impact your credit.
Therefore, properly discharging a lien with a bond is crucial.
The Renewal Process
Michigan Release of Lien Bonds typically remain in effect until the underlying dispute is resolved. Therefore, they do not usually require annual renewal. However, it's essential to maintain communication with the surety company and provide any updates regarding the dispute. Once the dispute is resolved, the bond can be released. Given the legal nature of this bond, it is important to keep your contact information up to date, so that you receive all important notifications. For more Michigan specific information regarding surety bonds, please review the Michigan surety bond page.
FAQ
Q: What happens if the lien claimant wins their claim?
A: The surety company will pay the claimant up to the bond amount. You will then be responsible for reimbursing the surety company.
Q: Can I get a bond if I have bad credit?
A: Yes, it's still possible to obtain a bond with less-than-perfect credit. However, your premium might be slightly higher.
Q: How long does it take to get a bond?
A: The time it takes to obtain a bond can vary depending on the complexity of your financial situation and the responsiveness of the surety company. Typically, it can take a few days to a week.
Q: Do I need to contact the court before applying for the bond?
A: It is recommended that you consult legal counsel before proceeding.
Q: Is the Release of Lien Bond the same as a performance bond?
A: No, they are different. A Release of Lien Bond discharges a lien, while a performance bond guarantees project completion.
Sources:
- Michigan Construction Lien Act (Act 497 of 1980): Legal foundation for construction liens and their discharge.
- Michigan Compiled Laws (MCL) 570.1101 et seq.: Codification of the Michigan Construction Lien Act.